Rebuilding your credit takes a couple of years, but it’s not too difficult. It consists of 2 different parts: 1) Adding positive things to your score, and 2) getting rid of negative ones.
First I’ll cover how to add positive reports to your credit score. If you have any item of value (paid-off car, gold coins, a $500 certificate of deposit), run down to your friendly banker and take out a small loan against it. The banker will put a lien on your asset so that you can’t sell it without paying him first. Make sure to ask your banker whether they report on-time payments to the credit bureaus every month (some only report late payments). When you’ve paid off the first loan, do the same thing again.
Meanwhile, start applying for gas and department store credit cards. These are easier to get than Visa, Mastercard, or Discover, and they typically report to the credit bureaus every month. After 6 months to a year of on-time payment with these cards, your mailbox will be stuffed with bank-card applications (the aforementioned Visa/Mastercard/Discover). Feel free to get a couple.
Keep in mind that a large part of your credit score is determined by the ratio of your total credit to how much of it you’ve actually used. If you have available credit of $20,000 among your various cards, for example, and you’ve used $18,000 of it, you’ll be thought of as a poor credit risk.
As far as removing negative items on your credit reports, there are a couple of ways to do this: 1) Wait. Unpaid debt drops off by itself in 7 years, bankruptcies take 10 years. 2) When you’re seeing friendly Mr. Banker, have him give you a copy of your credit report. He’ll likely request a copy for himself, anyway. Have him take just a couple of minutes with you and indicate the items which are hurting your credit. If you have bad debt from 4 or 5 years ago, and don’t want to wait the extra few years for it to drop off, you can send a letter to each of the three credit reporting agencies, stating that you have no knowledge of that debt, and requesting them to "reaffirm" (important to use that word, "reaffirm") that entry on your report. The credit reporting agencies will then have to contact Citibank, or whoever, and ask them to check their records to make sure that the debt is valid. If Citibank doesn’t feel like doing the extra work, however, or if their records of you are packed in a warehouse in Outer Bangladesh, they likely won’t respond to the inquiry and that nasty little item will drop off your reports.
As far as using your credit to fund a small business, good luck. Banks hate small businesses, because they fail frequently. When asking a bank for a loan, they want to see real collateral, like a building, or a car. They don’t want to loan money on a rental space full of clothes or bric-a-brac, or restaurant equipment, because these won’t bring much at auction if your business collapses. In short, you’ll probably be using your own credit to fund your business, at least for the first 5 years.
